OUTLINE FOR CONTRACTS

The purpose of this Outline is to give you an approach to determining if we

have a Valid contract that the Court will enforce against another party. From my
teaching standpoint, I approach the issue of whether we have a valid contract in
any given situation by determining “What can I do to get out of this so-called
contract?” If you determine that you have a Valid, Enforceable Contract and that
you have no defenses you can use or you have no ability to discharge your
liability to perform your part of the contract, you are stuck with the contract and
you will lose your case.
During class, I will be giving you what I call a “FLOW CHART” in order for
you to be able to determine how you should proceed in order to determine a
Parties’ (the Defendant’s) liability in each area of the law pertaining to Contracts
that we are going to cover.

With respect to this Outline and all other Outlines that I will be giving
to you, PLEASE BE ADVISED that the receipt of an Outline is not going to
guarantee you a passing grade. The Outline is only that. It is a guide to
what we will be discussing in class. YOUR ATTENDANCE IN CLASS IS
VERY IMPORTANT AS THE OUTLINES WILL NOT CONTAIN ALL OF THE
INFORMATION NECESSARY TO PASS THE EXAMS. Everything on the
Exams that I will be giving you will be covered in class, BUT not
necessarily on the Outline. Attendance to ALL CLASSES is strongly
suggested.

A. APPROACH TO CONTRACT LAW

With respect to answering any question involving an issue of Contract
Law, the following FLOW CHART is appropriate:
1. Do we have a VALID Contract?
2. Is the Valid Contract ENFORCEABLE?
3. Does your Client have any AFFIRMATIVE DEFENSES available?

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 4. Has your Client’s liability to perform their part of the Contract
been DISCHARGED for any legal reason?

The answer to each of these four (4) major issues will determine if you have
a Contract that the Court will enforce and make a ruling as to the liability of
your Client. You must determine if your Client has a DEFENSE in order
to avoid having to perform his/her part of the Contract.

The following is a step- by- step approach as to whether or not you can
get your Client out of a Contract. In order to resolve any legal problem, you must
go through each of these four (4) steps and determine if your Client has a
Defense.

1. DO WE HAVE A VALID CONTRACT?

To determine whether we have a Valid contract, we must determine if the
Contract meets the four (4) essential elements of a contract, which are as
follows:

ESSENTIAL ELEMENTS OF A CONTRACT

1. MANIFESTATION OF MUTUAL ASSENT

A. Offer;

B. Acceptance

2. CONSIDERATION

3. PARTIES WITH LEGAL CAPACITY

4. LEGALITY

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If the contract your dealing with meets these four (4) essential elements, then the
Contract is deemed to be Valid. If you are missing any one (1) of these four (4)
essential elements of a Contract, the Contract is deemed to be Void.

With respect to each of these elements, we look for the following information:

A. MANIFESTATION OF MUTUAL ASSENT

As discussed above, this element of a contract involves the issues of an Offer

and an Acceptance.

1. Offer
(a) ISSUE: Do we in fact have an offer made: How do we
determine if we have an offer?
Discuss “Words of Offer” vs. “Words of Preliminary Negotiations
To determine if we have an offer, we must know what the
essential elements of an offer are. They are as follows:
(i) Manifestation of Present Contractual (K’ual) intent, which
means:
Did the party intend to make an offer in the first place” How
to tell:
Things to look for: (1) Words Used;
(2) Surrounding Circumstances;
(3) To whom the offer is made.

(ii) Certainty and Definiteness of Terms, which means:

If the party did intend to make an offer, do we know what it
was that he/she was going to do?
Things to look for: (a) Description of Subject Matter
(b) Time for Performance
(c) Price
(iii) Direct Communication of the offer to the intended Offeree
This means: Was the offer directly communicated to the
intended Offeree? You can not use third parties.
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(b) If, after going through this check list, you determine that the offeror
did make an offer, then you must consider whether the offer was
terminated for any legal reason.
There are (8) ways that an offer can be terminated. These are:
(1) By rejection of the offer by the offeree;
(2) By lapse of time set forth in the offer; (If no time is
specified, use the “Doctrine of Reasonableness”
(3) By death or destruction of the subject matter;
(4) By Death or mental illness of the Offeror;
(5) By bankruptcy of the Offeror;
(6) By the offer becoming illegal;
(7) By acceptance of the offer by the Offeree;
(8) By revocation of the offer by the Offeror. The Law as to
when a revocation of an offer is effective will be discussed in
class.
If you find that an offer has been made and it has not been terminated,
then you proceed to discuss whether or not the offer was accepted by the
offeree.

2. Acceptance of an Offer

With the issue of acceptance of an offer, you are trying to

determine, under the Law, whether or not the person actually
accepted the offer.

To start with, there are three (3) basic rule in acceptance of an

offer.
These rules (Laws) are:
1. The right or power to accept an offer is personal to
the intended offeree. Only the intended offeree can
accept the offer.
2. An offer CAN NOT BE ASSIGNED OR
TRANSFERRED TO ANOTHER PERSON.
3. The intended offeree has only two (2) choices:
(1) To accept the offer or; (2) To reject the offer.
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When it comes to the acceptance of an offer, there are two (2) Laws:
1. General Rule: You accept an offer by the same mode of
communication that the offer was made. If you accept by the
same mode of communication that the offer was made, then
then acceptance of that offer is effective the moment that
you turn your acceptance over to that mode of
communication.
2. Exception to General Rule: If the Offeree elects to accept
an offer by a different mode of communication that the offer
was made, then the penalty the offeree receives is that his
acceptance of the offer is not effective until it is RECEIVED
by the offeror.
Once you determine that there is a genuine offer on the table and it has
been accepted, THEN YOU HAVE A CONTRACT.
HOWEVER, just because you have a contract, the issue is “Is it a VALID
Contract.” To determine this, you must determine if the other three (3)
essential elements have been met. Thus, we proceed to the second (2 nd)
essential element, that being the element of Consideration.

B. CONSIDERATION

Consideration is the heart of a Contract. It is the whole reason you

entered into the contract in the first place. What is called “Consideration”
is an exchange of some agreed upon item or items between the two (2)
contracting parties. In essence, what we are referring to is that in order to
legally obtain something from another party, you must be willing to give up
something to that other party that you did not have to do legally before you
entered into the contract. If this occurs, then, as a general rule, we have
consideration.

Issues that we will discuss in class about the essential element of

consideration are as follows:
1. Gift vs. Consideration;
2. Benefit – Detriment Rule;
3. Pre-Existing Legal Duty Doctrine (i.e. An attempt to re-
negotiate the terms of a contract.
4. An Illusory Promise.
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5. Adequacy of Consideration vs. Sufficiency of Consideration

If you decide that the element of Consideration has been met, you then
proceed to the next essential element of a contract which is Parties with
Legal Capacity.

C. PARTIES WITH LEGAL CAPACITY

Previously, you learned that a Contract can be classified a Valid, Voidable,

or Void. It is with the essential element of Parties with Legal Capacity
that we examine the issue of a Voidable Contract.
As stated in class, the definition of a Voidable Contract is “It is a valid
contract but, under the law, one of the parties to the contract, has the right
to later void the Contract.”

So here, you will be discussing whether or not if one of the parties to the
contract had the legal capacity to enter into the contract and if they did
initially, do they have a right to subsequently void the contract thus, the
Court will do nothing to assist the parties to the contract.
When it comes to the element of Parties with Legal Capacity, the things to
look for and which will be discussed in class are as follows:

1. Are there minors involved in the Contract?

2. Are there parties who claim to have been intoxicated,
incompetent or suffering from a mental illness at the time
they entered into the Contract?
With respect to each of the above named parties, we will discuss what a party
must prove in order to use this essential element to “get out of the Contract” and
and what a party’s rights are if they can prove either of the above items (1) and
(2). We will also discuss the Exceptions to the Law which may prevent a party
from using Legal Capacity as a defense to a Contract.
If a party to a contract can prove that they meet the legal requirements under the
Law with respect to being either a minor or proving that at the time they entered
into the Contract, they were intoxicated, incompetent, or suffering from a mental
illness, then THAT PARTY ONLY has the right to void the Contract, meaning that
they do not have to carry out their end of the bargain.

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 If Legal Capacity is not an issue (a defense for your client) then you
proceed to the final essential element that you look at in determining if
your client has entered into a Valid Contract. This is the essential
element of Legality.

D. LEGALITY

All contracts must be for a legal purpose. You can not enter into a
contract for the purposes of committing an illegal act. All of the questions
that I will give you on an exam will involve only legal purposes. Therefore,
do not worry about this essential element. I point this out only because it
is one of the essential elements of a contract that must be met in order to
have a Valid Contract.

SUMMARY OF ESSENTIAL ELEMENTS

If, after going through the check list of the four (4) essential elements of a
Contract, you find that all of the essential elements have been met or
complied with, then the Law will state that you have a VALID CONTRACT
and let you proceed. If you fail to meet all four (4) of the essential
elements, then the Court will find the Contract to be VOID and dismiss the
case, leaving the parties where they are. The Court will not assist either
party.

HOWEVER, before a Contract will do you any good, that Contract must
not only be VALID, but it must also be ENFORCEABLE as well.
Thus, we will now discuss the separate requirement that the VALID
Contract must also be ENFORCEABLE.

2. IS THE VALID CONTRACT ENFORCEABLE?

When you discuss the issue of whether a Valid Contract is enforceable,
you are referring to whether or not the Valid Contract violates one of the
four (4) STATUTES OF FRAUD (S/F). Thus, we are referring to the
enforceability of a Contract.
The definition of ENFORCEABILITY OF A CONTRACT is as follows;
“A contract that does not violate one of the four (4) Statutes of
Fraud.”

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 The Statute of Frauds (S/F) states that certain Contracts must be in
writing in order to be enforceable. Thus, if a Contract violates one of the
four (4) Statutes of Fraud, it is unenforceable. If the Contract, even if
Valid, is unenforceable, the Court must dismiss the case and leave the
parties where they are. The Court will not render either side any
assistance.

IT IS VERY IMPORTANT TO REMEMBER THAT THE STATUTES OF

FRAUD (S/F) ONLY APPLY TO ORAL CONTRACTS. THE LAW
STATES “ALL WRITTEN CONTRACTS ARE AUTOMATICALLY
ENFORCEABLE. SO, IF THE CONTRACT IS IN WRITING, YOU NEED
NOT BE CONCERNED ABOUT THE ISSUE OF ENFORCEABILITY.
YOU ONLY NEED TO BE CONCERNED ABOUT ENFORCEABILITY OF
A CONTRACT IF IT IS AN ORAL CONTRACT.

There are four (4) basic Statutes of Fraud (S/F) which are applicable to
oral contracts. These are as follows:

1. Any contract for sale of Real Property must be in writing in

order to be enforceable.
2. Any contract, which by its very terms, can not possibly be
completely performed within one (1) year from the date of
entry, must be in writing in order to be enforceable.
3. Guarantee Contracts. Promises to pay for or discharge the
debt of another person or entity must be in writing in order to
be enforceable.
This means, if you promise to pay someone else’s debt if
they don’t pay it, then your promise to pay must be in writing
in order to be enforceable.
4. Any contract for the sale of goods, the purchase price of
which is $500.00 or more, must be in writing in order to be
enforceable.
These are the four (4) basic Statutes of Fraud (S/F) that you must
look for if you are dealing with an oral contract. A violation of any
any of these Statutes of Fraud (S/F) will make the contract
unenforceable and the Court will dismiss the case and take no
action to assist the parties.

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 Even if you have an oral contract which violates one (1) of the four
(4) Statutes of Fraud (S/F) thus, making the contract unenforceable
there is a way to save the contract by apply what is called the Part
Performance Doctrine.

PART PERFORMANCE DOCTRINE

1. Purpose of the Part Performance Doctrine – to save a valid
but unenforceable contract and make it enforceable so as
over rule the unenforceable status of the contract.
2. You can only apply the Part Performance Doctrine if the
contract is partially executed.
You can show proof of Part Performance in one of two (2) ways:
a. Where payment is made and accepted
(This can be a partial payment)
b. Where the goods are received and accepted.
A more detailed discussion of the Part Performance Doctrine will be
addressed in class.

Once you have proven to the satisfaction of the Court that the contract
that you are dealing with is both Valid and Enforceable, then you are
allowed entry into the Court and the court will assist both parties in arriving
at a final decision.

3. AFFIRMATIVE DEFENSES

As stated above, once you have determined that we are dealing with a
contract that is not only Valid but, which is also Enforceable, then you
have run out of any technicality or loop-hole “to get out of the contract”
and you must now comply with the contract.
If we are dealing with a Valid and Enforceable contract, then the next
issue that you need to investigate in order to mitigate your damages that
you could receive as a result of entering into the contract is that area
called AFFIRMATIVE DEFENSES.
Affirmative Defenses are defenses that the person alleging them must
prove before the court will grant a REMEDY to them.

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 There are many Affirmative Defenses, but the one’s that will discussed in
class consist of the following:
1. Mistake of a Material Fact – There are two (2) kinds of mistake.
a. Unilateral Mistake of Fact – no remedy will be granted
b. Mutual Mistake of Fact – the Court will grant a remedy
2. Misrepresentation – can be an “Innocent misrepresentation” With
misrepresentation, you do not need to prove intent to misrepresent.
3. Fraud – With fraud, you must prove “intent to defraud”
4. Undue Influence
5. Duress.

REMEDIES

If a party can prove any of these Affirmative Defenses, then the Court will
grant that party what is called a Remedy so as to make that party “Whole”
again”, by which we mean to put that party back to the same place they
were in before they entered into the Contract in the first place.

If a party proves an Affirmative Defense, then they are entitled under the
law, to a remedy. The type of remedies that a party proving an
Affirmative Defense can request from the Court are as follows:
1. Recission;
2. Monetary Damages;
3. Reformation
Each of these remedies will be discussed in class. A party can get any
one of these three (3) remedies, or a combination of them, if appropriate.

4. DISCHARGE OF LIABILITY

If you find that there is a Valid, Enforceable contract, and that there are no
Affirmative Defenses that you can use to defend your client, the final way
that a party can “get out of the contract” is through a process called
“DISCHARGE OF LIABILITY”.

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 When looking at the Issue of “DISCHARGE OF LIABILITY”, you are not
denying that there is a Valid, Enforceable contract and that you have no
Affirmative Defenses, your defense is “that for some legal reason, your
client’s liability to perform his/her part of the contract has been discharged.
This can occur by any of four (4) ways as follows:

1. Discharge by Performance.
This means that if you have performed your end of the
contract, then your obligation for any future performance
has been discharged.
2. Discharge by Agreement of the Parties
This refers to the parties own conduct of setting up ways that
their obligation to perform their part of the contract can be
discharged, but, they must be placed into the written contract
that they are entering into. These include the following:

A. By a contingency clause set forth in the written

contract.
B. By Mutual Recission;
C. By the substitution of another contract;
D. By Accord and Satisfaction.

3. Discharge by Legal Doctrine

Legal Doctrine refers to “Judge made Law” which is a
procedural rule used by the Courts to resolve a problem
which the Court finds to justify a reason that a party does not
have to perform their obligations under the contract. These
include:
A. Impossibility of Performance Doctrine
This Doctrine is comprised of two (2) parts:
i. Subjective Impossibility of Performance
This says: “I can’t perform my part of the contract,
BUT, someone else can.”
The Court WILL NOT GRANT A DISCHARGE for
Subjective Impossibility of Performance.

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 ii. Objective Impossibility of Performance
This says: “I can’t perform my part of the contract,
BUT, NEITHER CAN ANYONE ELSE.
The Court WILL GRANT A DISCHARGE OF
LIABILITY for Objective Impossibility of Performance.

B. Frustration of Purpose Doctrine

This occurs when “The bargained for element of a
contract is still possible, BUT, the purpose of the
bargained for element is not longer possible.”
The Court will grant a discharge of Liability for
Frustration of Purpose Doctrine and grant you a
remedy.
4. Discharge By Legal Statute
These ways of being discharge from your liability to perform
your part of the contract are based upon a Legal Statute
allowing you to discharge your liability if proven. These
include:
A. Discharge by the running of the Statute of Limitations;
B. Discharge by Court Order;
C. Discharge by Bankruptcy.

CONCLUSION
If, after you have gone through this Outline and its accompanying (Flow Chart)
and you have determined that we have a Valid, Enforceable Contract, and that
there are no Affirmative Defenses that your client can use, and that neither
parties’ obligation to perform their part of the Contract has been discharged for
any legal reason, then you will arrive at the conclusion that the Court will enforce
the Contract in accordance with its terms as agreed upon by the parties and
require them to comply with the terms of the Contract. However, If you find a
Defense that favors your client and and you can prove it, then your client will be
granted relief or a remedy to assist them.

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